Just 32 per cent of the Year 1 pupils in 300 schools who took a trial run of the test passed it.
In total 8,963 children took part in the pilot in June.
Ministers believe that systematic synthetic phonics is the method proven to improve reading standards for all children, including the weakest readers.
However, critics of the test, which involves children reading aloud a mixture of real and made-up words, say that it does not give a true picture of children’s reading ability or comprehension.
Around a quarter of the schools that took part in the test teach phonics systematically, in contrast to schools that use a variety of methods, such as using picture clues and memorising words. The proportion is thought to be similar for all primary schools in England.
Schools minister Nick Gibb said, ‘We need to face up to the uncomfortable truth that, despite the hard work of teachers, not enough of our children are able to read to a high enough standard.
‘We have to take account of our place internationally and listen to business leaders concerned about many school leavers’ literacy.
‘The Government can no longer simply congratulate itself on the proportion of pupils reaching the expected level.
‘The phonics check’s expected level, set by teachers, is appropriately challenging. We must adjust our sights if we are to tackle the country’s reading problem.
‘The levels we expect children to reach at Key Stage 1 and Key Stage 2 must not be the limits of our ambition – they should be considered the minimum we expect.
‘And we must get those below the level up to a standard that will help them progress further.
‘A solid grounding in phonics will help many children who are weak readers to improve.
'It will also see more pupils achieve a high Level 2 or a Level 3 score at the end of Key Stage 1.’
Mr Gibb went on to say that while some schools had embraced phonics and had done very well in the pilot, the results showed that some other schools could be more systematic in teaching phonics.
He said that phonics was being prioritised in teacher training and that the Government was providing £3,000 in match funding so that schools could buy resources and books. Phonics and reading will also be a key part of new Ofsted inspections, he said.
Concern about test and children with language difficulties
However, the Communication Trust, a group of 50 voluntary organisations specialising in children’s speech, language and communication, said they were very concerned about the impact of the phonics test on children with SLCN.
The Trust highlighted finding from the evaluation of the test carried out by Sheffield Hallam University that found that only a third of teachers felt that the check accurately assessed the reading of children with speech difficulties.
Director of the Trust Anita Kerwin-Nye has called for an urgent meeting with Mr Gibb to discuss the issue.
Ms Kerwin-Nye said, ‘We fully support the Government’s ambition to improve literacy standards in English schools, and welcome the Department for Education’s support for communication, language and literacy in the Early Years Foundation Stage.
‘However we are very concerned about the impact the Year 1 phonics screening, and the wider emphasis on phonics, on children with speech, language and communication needs.
'This concern is backed up by the findings of the evaluation carried out by Sheffield Hallam University.
'This showed that nearly 29 per cent of schools felt the experience of the phonics screening check was negative for children with SLCN and that only 35 per cent felt the check accurately assessed the decoding abilities of children with speech difficulties.
‘These figures alone suggest significant changes need to be made to the way the Screen is implemented.
'Phonics is a valid approach to teaching reading but it is essential that it is delivered as part of a well-rounded approach to communication and literacy skills.’